[LOGO]
U.S. Equity Fund
ANNUAL REPORT
October 31, 1998
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 1998
Shares Value
- ------ ---------
COMMON STOCKS (101.1%)
BASIC MATERIALS (1.2%)
13,100 DuPont E.I.
DeNemours & Co......................................... $ 753,250
---------
CAPITAL GOODS/DURABLES (6.9%)
15,250 AMR Corp................................................. 1,021,750
27,150 Ford Motor Co............................................ 1,472,887
20,100 General Electric Co...................................... 1,758,750
---------
4,253,387
---------
CONSUMER NON-DURABLES (10.3%)
30,650 Avon Products, Inc....................................... 1,216,422
20,200 BestFoods................................................ 1,100,900
21,800 Heinz (H.J.) Co.......................................... 1,267,125
27,250 Philip Morris Co., Inc................................... 1,393,156
15,900 Procter & Gamble Co...................................... 1,413,112
---------
6,390,715
---------
ENERGY (6.6%)
13,500 Chevron Corp............................................. 1,100,250
16,900 Exxon Corp............................................... 1,204,125
22,500 Halliburton Co........................................... 808,594
31,200 Nobel Affiliates, Inc.................................... 1,021,800
---------
4,134,769
---------
FINANCIAL (16.0%)
23,650 Allstate Corp............................................ 1,018,428
10,250 American Express Co...................................... 905,844
15,350 American International
Group.................................................. 1,308,587
14,600 Associates First
Capital Corp........................................... 1,029,300
17,650 Chase Manhattan Corp..................................... 1,002,741
23,100 Citigroup, Inc........................................... 1,087,144
18,200 Fannie Mae............................................... 1,288,787
17,050 SunAmerica, Inc.......................................... 1,202,025
31,300 Vornado Realty Trust..................................... 1,054,419
---------
9,897,275
---------
HEALTHCARE (18.1%)
28,350 Abbott Laboratories...................................... 1,330,678
10,900 Bristol Myers Squibb Co.................................. 1,205,131
45,400 Healthsouth Corp.*....................................... 550,475
15,500 Johnson & Johnson........................................ 1,263,250
21,700 Lilly (Eli) & Co......................................... 1,756,344
16,900 McKesson Corp............................................ 1,301,300
22,250 Medtronic, Inc........................................... 1,446,250
9,500 Merck & Co, Inc.......................................... 1,284,875
10,800 Schering Plough Corp..................................... 1,111,050
----------
11,249,353
----------
RETAIL (8.4%)
35,550 Borders Group, Inc.* .................................... 902,081
15,500 Costco Companies, Inc.*.................................. 880,109
20,850 Dayton Hudson Corp....................................... 883,519
32,700 Mattell, Inc............................................. 1,173,112
20,200 Wal-Mart Stores, Inc..................................... 1,393,800
----------
5,232,621
----------
SERVICE (10.0%)
26,600 At Home Corp.*........................................... 1,175,388
15,900 AT&T Corp................................................ 989,775
35,450 Carnival Corp............................................ 1,147,694
35,100 Tele-
Communications, Inc.*.................................. 1,476,394
15,050 Time Warner, Inc......................................... 1,396,828
----------
6,186,079
----------
TECHNOLOGY (21.2%)
8,950 America Online, Inc....................................... 1,137,209
20,750 Ascend
Communications, Inc.*.................................. 1,000,539
42,850 Cadence Design
Systems, Inc.*......................................... 915,919
22,150 Cisco Systems, Inc.*..................................... 1,397,527
22,050 Computer Associates
International, Inc..................................... 868,219
15,250 Dell Computer Corp.*..................................... 999,352
24,850 EMC Corp.*............................................... 1,599,719
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 1998 (continued)
Shares Value
- ------ ----------
TECHNOLOGY (continued)
11,500 International Business
Machines Corp.......................................... $ 1,707,031
15,300 Lucent Technologies, Inc................................. 1,226,869
12,300 Microsoft Corp.*......................................... 1,302,647
23,120 Northern Telecom, Ltd.................................... 989,825
-------------
13,144,856
-------------
27,250 Ameritech Corp........................................... 1,469,797
-------------
TOTAL INVESTMENTS (IDENTIFIED COST $57,179,461) (a) .. 101.1% $ 62,712,102
CASH AND OTHER ASSETS LESS LIABILITIES ............... (1.1) (657,559)
----- -------------
NET ASSETS .......................................... 100.0% $ 62,054,543
===== =============
- ----------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $57,497,760, the
aggregate gross unrealized appreciation is $10,385,718, and the aggregate
gross unrealized depreciation is $5,171,376, resulting in net unrealized
appreciation of $5,214,342.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
ASSETS:
Investments in securities, at value
(identified cost $57,179,461) (Note 1)...................... $62,712,102
Receivables for:
Investments sold............................................ 10,088
Capital stock sold.......................................... 14,768
Dividends................................................... 63,089
-----------
Total Assets .......................................... 62,800,047
-----------
LIABILITIES:
Due to bank .................................................. 386,957
Payables for:
Capital stock redeemed...................................... 262,503
Investment advisory fee (Note 2)............................ 34,315
Shareholder servicing/eligible
institution fees (Note 2)................................. 13,198
Administrative fee (Note 2)................................. 7,919
Accrued expenses and other liabilities...................... 40,612
-----------
Total Liabilities ...................................... 745,504
-----------
NET ASSETS ...................................................... $62,054,543
===========
Net Assets Consist of:
Paid-in capital............................................... $38,418,596
Accumulated net realized gain
on investments.............................................. 18,103,307
Net unrealized appreciation................................... 5,532,640
-----------
Net Assets....................................................... $62,054,543
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($62,054,543 / 1,219,736 shares).............................. $50.88
======
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
INVESTMENT INCOME:
Income:
Dividends .................................................. $ 870,801
Interest ................................................... 3,145
------------
Total Income ........................................... 873,946
------------
Expenses:
Investment Advisory fees (Note 2)........................... 476,908
Administrative fee (Note 2)................................. 110,056
Shareholder servicing/eligible
institution fees (Note 2)................................. 183,426
Director's fees and expenses (Note 2)....................... 8,870
Custodian fee............................................... 42,467
Miscellaneous expenses...................................... 64,366
------------
Total Expenses ......................................... 886,093
Fees paid indirectly (Note 3) ....................... (42,467)
------------
Net expenses......................................... 843,626
------------
Net Investment Income ............................... 30,320
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (Notes 1 and 3):
Net realized gain on investments............................ 18,080,219
Net change in unrealized
appreciation on investments............................... (16,733,860)
------------
Net Realized and Unrealized Gain ........................... 1,346,359
------------
Net Increase in Net Assets
Resulting from Operations ................................ $ 1,376,679
============
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U. S. EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................................. $ 30,320 $ 139,682
Net realized gain on investments ....................... 18,080,219 4,907,031
Net change in unrealized
appreciation on investments .......................... (16,733,860) 10,671,447
------------ ------------
Net increase in net assets resulting from operations 1,376,679 15,718,160
------------ ------------
Dividends and distributions declared (Note 1):
From net investment income ............................. -- (173,313)
In excess of net investment income ..................... -- (60,926)
From net realized gains ................................ (4,159,510) (2,197,030)
------------ ------------
Total dividends and distributions declared ......... (4,159,510) (2,431,269)
------------ ------------
Capital stock transactions (Note 4):
Net proceeds from sales of capital stock ............... 17,577,439 14,116,589
Net asset value of capital stock issued to shareholders
in reinvestment of dividends and distributions ........ 260,055 1,586,012
Net cost of capital stock redeemed ..................... (22,044,704) (10,717,604)
------------ ------------
Net increase/decrease in net assets resulting
from capital stock transactions ................... (4,207,210) 4,984,997
------------ ------------
Total increase/decrease in net assets .............. (6,990,041) 18,271,888
NET ASSETS:
Beginning of year ........................................ 69,044,584 50,772,696
------------ ------------
End of year (including undistributed net investment
income of $0 and $18,153, respectively) ................ $ 62,054,543 $ 69,044,584
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U. S. EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout each year
<TABLE>
<CAPTION>
For the years ended October 31,
---------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $52.73 $42.30 $36.46 $29.84 $28.80
Income from investment operations:
Net investment income ................... 0.03 0.21 0.16 0.26 0.26
Net realized and unrealized gain ........ 1.24 12.22 6.75 7.15 1.05
Less dividends and distributions (Note 1):
From net investment income .............. -- (0.14) (0.20) (0.28) (0.17)
In excess of net investment income ...... -- (0.05) -- -- --
Net realized gains ...................... (3.12) (1.81) (0.87) (0.51) (0.10)
------ ------ ------ ------ -----
Net asset value, end of year .............. $50.88 $52.73 $42.30 $36.46 $29.84
====== ====== ====== ====== ======
Total Return1 ............................. 2.50% 30.29% 19.32% 25.50% 4.61%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).. $62,055 $69,045 $50,773 $32,000 $22,124
Expenses as a percentage of average
net assets:
Expenses paid by Fund(1) .............. 1.15% 1.20% 1.20% 1.20% 1.20%
Expense offset ........................ 0.06% 0.02% n/a n/a n/a
------ ----- ----- ----- -----
Total Expenses .................... 1.21% 1.22% 1.20% 1.20% 1.20%
Ratio of net investment income to average
net assets ............................ 0.04% 0.23% 0.40% 0.84% 1.06%
Portfolio turnover rate ................. 104% 37% 42% 69% 61%
</TABLE>
- -----------
(1) Had the expense payment agreement not been in place, the ratio of expenses
to average net assets and total return would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets................. N/A 1.16% 1.21% 1.28% 1.46%
Total return......................... N/A 30.33% 19.31% 25.42% 4.35%
</TABLE>
Furthermore, the ratio of expenses to average net assets for the year ended
October 31, 1997, 1996 and 1995 reflect fees paid with brokerage commission
and fees reduced in connection with specific arrangements. Had these
arrangements not been in place, the ratio would have been 1.18%, 1.30% and
1.38%, respectively. The expense reimbursement agreement was terminated on
July 1, 1997.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
U.S. Equity Fund (the "Fund") is a separate, diversified series of The 59 Wall
Street Fund, Inc. (the "Corporation") which is registered under the Investment
Company Act of 1940, as amended. The Corporation is an open-end management
investment company organized under the laws of the State of Maryland on July 16,
1990. The Fund commenced operations on July 23, 1992.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make certain
estimates and assumptions at the date of the financial statements and are based,
in part, on the following accounting policies. Actual results could differ from
those estimates.
A. Valuation of Investments. (1) The value of investments listed on a
securities exchange is based on the last sale price on that exchange prior
to the time when assets are valued, or in the absence of recorded sales, at
the average of readily available closing bid and asked prices on such
exchange; (2) unlisted securities are valued at the average of the quoted
bid and asked prices in the over-the-counter market; (3) securities or
other assets for which market quotations are not readily available are
valued at fair value in accordance with procedures established by and under
the general supervision and responsibility of the Corporation's Board of
Directors. Such procedures include the use of independent pricing services,
which use prices based upon yields or prices of securities of comparable
quality, coupon, maturity, and type; indications as to the value from
dealers; and general market conditions; (4) short-term investments which
mature in 60 days or less are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their value on the 61st day
prior to maturity, if their original maturity when acquired by the Fund was
more than 60 days, unless this is determined not to represent fair value by
the Board of Directors.
B. Accounting for Investments. Security transactions are accounted for
on the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend
date. Interest income is accrued daily.
C. Federal Income Taxes. It is the Corporation's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required. The
Fund files a tax return annually using tax accounting methods required
under provisions of the Internal Revenue Code which may differ from
generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return due to
certain book-to-tax timing differences such as losses deferred due to "wash
sale" transactions and utilization of capital loss carryforwards These
timing differences may result in temporary over-distributions for financial
statement purposes and are classified as distributions in excess of
accumulated net realized gains or net investment income. As such, the
character of distributions to shareholders reported in the Financial
Highlights table may differ from that reported to shareholders on Form
1099-DIV. These distributions do not constitute a return of capital.
D. Dividends and Distributions to Shareholders. Dividends to
shareholders from net investment income are paid semi-annually and are
recorded on the ex-dividend date. Distributions from net capital gains, if
any, are paid annually and are recorded on the ex-dividend date.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
2. Transactions with Affiliates.
Investment Advisory Fee. The Corporation has an investment advisory
agreement with Brown Brothers Harriman & Co. (the "Adviser") for which the
Adviser receives a fee from the Fund calculated daily and paid monthly at an
annual rate equivalent to 0.65% of the Fund's average daily net assets. For the
year ended October 31, 1998, the Fund incurred $476,908 for investment advisory
services.
Administrative Fee. The Corporation has an administrative agreement with
Brown Brothers Harriman & Co. (the "Administrator") for which it pays the
Administrator a fee calculated daily and paid monthly at an annual rate
equivalent to 0.15% of the Fund's average daily net assets. The Administrator
has a subadministration services agreement with 59 Wall Street Administrators,
Inc. for which 59 Wall Street Administrators, Inc. receives such compensation as
is from time to time agreed upon, but not in excess of the amount paid to the
Administrator. For the year ended October 31, 1998, the Fund incurred $110,056
for administrative services.
Shareholder Servicing/Eligible Institution Agreement. The Corporation has a
shareholder servicing agreement and an eligible institution agreement with Brown
Brothers Harriman & Co. for which Brown Brothers Harriman & Co. receives a fee
from the Fund calculated daily and paid monthly at an annual rate equivalent to
0.25% of the average daily net assets of the Fund. For the year ended October
31, 1998, the Fund incurred $183,426 for shareholder servicing/eligible
institution services.
Board of Directors' Fees. Each Director receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the year
ended October 31, 1998, the Fund incurred $ 8,870 for these fees.
3. Investment Transactions. For the year ended October 31, 1998, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $72,551,965 and $78,952,119, respectively. For that
same period, the Fund paid brokerage commissions of $61,145 to Brown Brothers
Harriman & Co. for transactions executed on its behalf. Custody fees for the
Fund paid pursuant to the expense payment agreement were reduced by $42,467 as a
result of an expense offset arrangement with the Fund's custodian.
4. Capital Stock. The Corporation is permitted to issue 2,500,000,000
shares of capital stock, par value $0.001 per share, of which 25,000,000 shares
have been classified as shares of the Fund. Transactions in shares of capital
stock were as follows:
For the years ended October 31
---------------------------------
1998 1997
--------- --------
Capital stock sold...................... 332,757 297,331
Capital stock issued in
connection with reinvestment
of dividends and distributions........ 5,191 35,562
Capital stock repurchased............... (427,691) (223,618)
-------- --------
Net increase (decrease)................. (89,743) 109,275
======== ========
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The 59 Wall Street U.S. Equity Fund (a series of The 59 Wall Street Fund, Inc.):
We have audited the accompanying statement of assets, including the
portfolio of investments, of The 59 Wall Street U.S. Equity Fund (a series of
The 59 Wall Street Fund, Inc.) as of October 31, 1998, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended October 31, 1998 and 1997, and the financial highlights for each
of the years in the five-year period ended October 31, 1998. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The 59 Wall Street
U.S. Equity Fund at October 31, 1998, the results of its operations, the changes
in its net assets, and its financial highlights for respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 11, 1998
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The following investment management strategies and techniques have
materially affected the Fund's performance for the fiscal year ended October 31,
1998.
U.S. Equity Fund
The US Equity rose 2.5% in the twelve-month period ending October 31, 1998,
well behind the performance of the S&P500. This underperformance reflected the
smaller capitalization bias of the fund's holdings. Each quarter had unique
characteristics. Specifically, the S&P500 steadily rose 14% in the first quarter
of 1998 and then in the third quarter recorded its most volatile period in ten
years. During this volatile period, we took the opportunity to purchase
attractive larger capitalization securities that previously appeared overvalued.
Stock selection was critical as the list of companies reporting strong earnings
gains continued to shrink. To identify these firms, we advocated two secular
themes: Leaders in their Field and the Internet.
Leaders in their Field as a secular theme may appear readily apparent.
However, we increasingly see a widening spread in the performance between the
leading companies in most industries and their remaining competitors.
The Internet has become a major force shaping the way businesses operate
and communicate, as well as how they sell their products.
[The following information was depicted as a line graph in the printed material]
U.S. Equity Fund Growth of $10,000
[The following information was depicted as a line graph in the printed material]
- --------------------------------------------------------------------------------
Total Return
- --------------------------------------------------------------------------------
One Year Five Years Inception
Ended Ended 10/31/98 to 10/31/98
10/31/98 (Annualized) (Annualized)
- --------------------------------------------------------------------------------
2.50% 15.89% 15.29%
- --------------------------------------------------------------------------------
U.S. Equity Fund* S&P 500 Index
----------------- -------------
6/30/92 10,000 10,000
7/31/92 10,320 10,338
8/31/92 10,076 10,114
9/30/92 10,284 10,245
10/31/92 10,332 10,281
11/30/92 10,837 10,630
12/31/92 10,747 10,760
1/31/93 10,872 10,850
2/28/93 10,892 10,998
3/31/93 11,055 11,230
4/30/93 10,615 10,958
5/31/93 10,890 11,251
6/30/93 10,974 11,284
7/31/93 10,893 11,238
8/31/93 11,374 11,664
9/30/93 11,326 11,574
10/31/93 11,670 11,813
11/30/93 11,638 11,701
12/31/93 11,858 11,842
1/31/94 12,042 12,244
2/28/94 11,801 11,912
3/31/94 11,296 11,394
4/30/94 11,382 11,540
5/31/94 11,614 11,729
6/30/94 11,496 11,442
7/31/94 11,843 11,817
8/31/94 12,293 12,300
9/30/94 12,109 12,000
10/31/94 12,208 12,269
11/30/94 11,745 11,823
12/31/94 11,939 11,998
1/31/95 11,977 12,309
2/28/95 12,441 12,788
3/31/95 13,043 13,165
4/30/95 13,332 13,552
5/31/95 13,667 14,093
6/30/95 14,039 14,420
7/31/95 14,581 14,898
8/31/95 14,590 14,935
9/30/95 15,043 15,565
10/31/95 15,321 15,509
11/30/95 16,287 16,189
12/31/95 16,524 16,501
1/31/96 16,921 17,062
2/29/96 17,292 17,221
3/31/96 17,330 17,387
4/30/96 17,248 17,643
5/31/96 17,241 18,097
6/30/96 17,285 18,166
7/31/96 16,252 17,364
8/31/96 16,762 17,730
9/30/96 17,964 18,727
10/31/96 18,279 19,243
11/30/96 19,524 20,696
12/31/96 19,106 20,286
1/31/97 19,786 21,553
2/28/97 19,674 21,722
3/31/97 19,101 20,831
4/30/97 20,041 22,074
5/31/97 21,915 23,417
6/30/97 22,660 24,465
7/31/97 24,377 26,411
8/31/97 23,740 24,933
9/30/97 24,576 26,297
10/31/97 23,817 25,420
11/30/97 24,521 26,596
12/31/97 24,896 27,052
1/31/98 24,848 27,351
2/28/98 26,201 29,323
3/31/98 27,319 30,823
4/30/98 27,141 31,133
5/31/98 26,244 30,599
6/30/98 26,076 31,841
7/31/98 25,232 31,502
8/31/98 21,187 26,952
9/30/98 22,200 28,679
10/31/98 24,411 31,010
- --------------------------------------------------------------------------------
* net of fees and expenses
Past performance is not predictive of future performance.
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
21 Milk Street
Boston, Massachusetts 02109
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
This report is submitted for the general information of
shareholders and is not authorized for distribution to
prospective investors unless preceded or accompanied by
an effective prospectus. Nothing herein contained is to
be considered an offer of sale or a solicitation of an
offer to buy shares of the Funds. Such offering is made
only by prospectus, which includes details as to
offering price and other material information.
